Will Texas Hit The California Wall?
Here's a little cautionary tale for Texans who are taking (justifiable) pride in their state's economic prowess: California was once a Texas, too.
In a recent Manhattan Institute study, demographer Robert Scardamalia and I compared the performance of the country's 100 largest metropolitan statistical areas, or MSAs, from 2009 to 2012. The four largest Texas MSAs - Dallas-Fort Worth, Houston, San Antonio and Austin - were all in the top 10 in a combined ranking based on gross domestic product, personal income and job creation. California had just one metropolitan statistical area in the top 10 - San Jose.
Texas is obviously doing things right. It helps that America is seeing an oil-and-gas boom that shows no signs of stopping, but the Texas economy is highly diverse. It is no more oil-dependent than California's is tech-dependent.
Fundamentally, Texas' economic success is a business-climate story. Companies start here, move here and expand here because Texas offers less regulatory red tape, lower labor costs and even lower taxes. It also has the fiscal strength to come up with incentives - something that strapped rivals like Illinois and California have trouble doing.
The Golden State was an economic juggernaut, growing explosively and drawing Americans by the millions with its promise of the good life. If anything, it was a bigger deal than Texas.
In the 1940s, California's economy grew by 53.5 percent. In the 1950s, it grew by just a bit less - 48.5 percent. Its growth slowed to 27 percent in the 1960s, but that was still ahead of Texas' recent pace of just more than 20 percent per decade. As late as the 1980s, California was still booming - up 25.7 percent in that decade.
The mantle of leadership - in population and economic growth, which are closely related - has passed since then to Texas. The Lone Star State most recently showed its mettle by rolling quickly through the "Great Recession" (big elsewhere, not so big in Texas), regaining all its lost jobs in little more than two years. It has taken California more than seven years to do the same.
The momentum of the four largest Texas MSAs continues. As of May 2014, all were adding private-sector jobs at an annual rate of more than 3 percent. Austin was surging at 4.2 percent and Dallas-Fort Worth was close behind at 3.9 percent. Nationwide, non-government payrolls were up just 2.1 percent.
So what could go wrong? An energy bust isn't likely. A water shortage is always a threat, but California is probably in worse shape than Texas in this regard. Texas' big cities, unlike California's, still have plenty of room to expand without running into natural barriers like bays and mountains.
But policies and attitudes can change, faster than you may realize. Until the 1970s, California was a pro-growth state, happy to be booming and doing what it needed to keep the boom going. Land was something to build on, not preserve in its pristine state. If people wanted to live where local water supplies were inadequate, California built dams and aqueducts to supply them. Too many cars? It would build more freeways.
Somewhere around the time when Ronald Reagan was winding up his term as governor and young Jerry Brown started talking about an "Era of Limits," California's attitude changed. In the 1970s, it started pulling up the drawbridge. The idea took hold, from homeowner groups to the state capitol, that the state was big enough and rich enough, and now had to focus on quality of life.
Land-use rules were tightened to allow fewer homes and to preserve more raw land. Instead of making more room for autos, the state started trying to get citizens out of cars and into trains. In its dealing with business, the state's complacency ("who wouldn't want to come to California?") led to neglect. Business was taken for granted or, in the case of land development, vilified.
From at least one Californian's perspective, Texas has not gone down this road yet. But it will soon face a choice about dealing with the impact of growth, such as traffic congestion, the loss of open space and the cost of supplying water. It must overcome these constraints by building, or it can go the route of restrictions and social engineering. The latter course can look cheaper in the short run, but California's experience shows what happens when "less is more" becomes a policy watchword: You end up with less when you really could have had more, if you had so chosen.
This piece originally appeared in Houston Chronicle
This piece originally appeared in Houston Chronicle